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Informist, Thursday, Aug 1, 2024

By Siddhi Chauhan 

MUMBAI – Fundraising through certificates of deposit rose on the back of a resurgence in demand from mutual funds at the beginning of the month. After a week of staying on the sidelines due to tepid demand from investors, banks today took the opportunity to raise 53.50 bln rupees against just 5 bln rupees on Wednesday.  

"Mutual fund's appetite was subdued (last week) because of redemption. With that out of the picture, mutual funds have funds to deploy," a dealer at a mid-sized brokerage firm said. "This is why we saw a rise in CD issuances today. There was demand for CP as well, but most of the deals could not be executed." 

Punjab and Sind Bank was the largest issuer today, raising 19 bln rupees through two papers maturing in three months and six months at 7.27% and 7.54%, respectively. Federal Bank and Canara Bank raised 10 bln rupees each through papers maturing in a year and six months at 7.72% and 7.44% respectively. Punjab National Bank and IDBI Bank also raised funds through CDs. On Bank of Baroda was the sole issuer of CDs on Wednesday, raising 5 bln rupees through a paper maturing in six months at 7.41%.

There were a few lenders who wanted to raise funds but were unsuccessful in doing so, as rates sought by investors were too high for the liking of issuers, dealers said.

While most mutual funds were seen buying CDs in the primary market, some mutual funds were selling paper of shorter maturity in order to raise funds in the secondary market, dealers said. 

Rejuvenated investor appetite also resulted in an increase in fundraising through commercial papers today. Non-banking financial institutions and companies raised 16 bln rupees through the short-term debt instrument today against just 5 bln rupees on the previous day. 

Today, Ultratech Cement raised 5 bln rupees through two papers maturing in three months at 7.17-7.18%, while Shriram Finance raised 6 bln rupees through a paper maturing in three months at 7.90%. As was the case for CDs, many CP deals could not be executed today because investors wanted to lock in higher rates, dealers said. 

"CP issuances could have been more today, till last we were hearing many some which did were not executed because of both parties could not agree over rates," a dealer at another brokerage firm said. 

Rates on CPs and CDs were unchanged from Wednesday. Rates on three-month CPs remained at 7.65-7.85%, while those of similar maturity issued by manufacturing companies were at 7.19-7.39%. Rates on CDs were quoted at 7.10-7.30%. 

--Primary market

*Ultratech Cement, Shriram Finance and raised funds through CPs

*Federal Bank, Canara Bank, Punjab and Sind Bank, Punjab National Bank, and IDBI Bank raised funds through CDs

End

Edited by Saji George Titus

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